Assignment:
Companies often try to keep accounting earnings growing at a relatively steady pace in an effort to avoid large swings in earnings from period to period. They also try to manage earnings targets. Reflect on these practices and answer the following.
• Are these practices ethical?
• What are two tactics that a financial manager can use to manage earnings?
• What are the implications for cash flow and shareholder wealth?
• Using the financial balance sheet as displayed in the text, provide an example of how purchasing an asset or issuing stocks or bonds could potentially impact earnings targets.
Your answer must be 200 to 250 words in length.